VI - Constituted trusts BOOK Flashcards
What does inter vivos mean?
An inter vivos trust takes effect during the settlor’s life and so is different from a testamentary trust.
How can a settlor create an express trust?
- By transfer to trustees
- By self-declaration
Each method results in the acquisition of a beneficial interest by the beneficary. But there is a difference in them:
In (1) the settlor no longer holds the property, and the beneficiary’s rights are against the transferees of the rpoperty.
In (2) the settlor retains the property, and the beneficiaries’ rights are against her.
This crucial difference means that, if the settlor intends to create a trust by means of a transfer to trustee, but fails to make that transfer, those facts alone do not permit the intended beneficiry to claim that an express trust has arisen by means of a self-declaration of trust by the settlor. This is because the settlor had no such intention to hold property on trust for the beneficiary, as she rather intended to transfer the property to trustees to hold on trust.
What is the principle of
Milroy v Lord?
This crucial difference means that, if the settlor intends to create a trust by means of a transfer to trustee, but fails to make that transfer, those facts alone do not permit the intended beneficiry to claim that an express trust has arisen by means of a self-declaration of trust by the settlor. This is because the settlor had no such intention to hold property on trust for the beneficiary, as she rather intended to transfer the property to trustees to hold on trust.
Milroy v Lord
X executed a deed to assign shares to Lord upon trust for the benefit of the plaintiffs. The shares were transferable only by entry in the books, but no such transfer was made. Lord had power to transfer the shares and the power to receive the dividends on the shares. The dividends were received by Lord and remitted by him to the platintiff’s, sometimes directly, sometimes through the settor. Shortly after the execution of the deed, Lord gave up the certificates to the settlor’s executor. The shares stood in the settlor’s name before and at the time of his death.
Turner LJ held: He wanted to give effect to the settlement but could not because in order to render a voluntary settlement valid and effectual, the settlor:
“must have done everything which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him”.
“There is no equity in this court to perfect an inperfect gift”.
Applying this: held: it was not the intention of the settlor, to constitute himself a trustee of the bank shares. The intention was that the trust was vested in Lord. Therefore, the settlor is not trustee. Held: no perfect trust was created in Lord. It was clear that the shares were never legally vested in him.
When does the rule in Milroy v Lord apply?
Only if it is the case that the settlor intended to set up the trust by means of a transfer to trustees, and failed to make that transfer.
When does the rule in Milroy v Lord not apply?
The rule does not prevent a court from finding that, on the facts, the settlor instead intended to, and indeed did, make a self-declaration of trust.
When interpreting the facts of a particular case, a court may be influenced by the “strong disposition” to give effect to the planned trust, and therefore find that the settlor intended a self-declaration rather than a transfer.
T. Choithram v Pagarani
PRIVY COUNCIL
When interpreting the facts of a particular case, a court may be influenced by the “strong disposition” to give effect to the planned trust, and therefore find that the settlor intended a self-declaration rather than a transfer.
Facts of T. Choithram v Pagarani
PC
Pagarani (refered to as TCP) organised a trust, where he was settlor and one of the trustees. He orally made an absolute gift of all his weath. However, for reasons, legal title to the property was not vested in the other trustees before he died. On his death, his children sought to establish that the attempted gift was ineffective.
Browne-Wilkinson Lord: Where there is an outright gift, the donor has to have done everything necessary to be done which is in his own power to do. If he has not, the gift is incomplete.
However,
“although equity will not aid a volunteer, it will not strive officiously to defeat a gift”.
Although the words used by TCP normally appropriate to an outright gift - in this context, there is no breach of the Milroy v Lord principle because, the foundation has no legal existence apart from the trust declared by the foundation trust deed. Therefore, the words “i give to the foundation” can only mean he gives it to the trustees to hold on trust.
Why were the courts able to distinguish Milroy v Lord from Pagarani?
- It was not clear that the settlor intended to establish the trust by way of transfer as, although he had an intention to make a gift to the “Foundation”, the Foundation had no legal personality in English law and so no transfer could be made to it.
- as the settlor was one of the trustees of the Foundation, it was possible to say that the settlor did in fact intend a self-declaration of trust, and the language of a gift to the Foundation meant that the settlor intended to hold the property on the terms of the trust set out in the Foundation’s trust deed.
Therefore, it was possible to find consistently with the rule in Milroy v lord that the settlor had intended, and succeeded in constituting an express trust by means of a self-declaration.
Re Ralli’s Will Trust
An intention to set up a trust by way of transfer does not preclude the possibility of the settlor also making a self-declaration of trust, to take effect immediately and to operate in the period pending the transfer.
Facts: a settlor may both promise to transfer exiting and future property to trustees to hold on trust AND also declare that particular exsiting property held by the settlor is, pending transfer to trustees, to be immeditely subject to the trust. In this case, the declaration cannot make a trust over future property not currently in the hands of the settlor, but will operate to bind the identified, exisiting property of the settlor.
What does Maitland think?
“Men often mean to give things to their kinsfolk, they do not often mean to consittute themselves trustees. An imperfect gift is no declaration of trust.”
